Trump faces dilemma as maritime fleets face off in Gulf

WASHINGTON - For years, international ships and crews have traveled in and out of the Gulf of Mexico to construct the offshore platforms and deep-sea pipelines that allow oil and gas thousands of feet below the surface of the ocean to get to market.

But now a long-running fight between U.S. energy and maritime companies about what work international crews can do under U.S. law has come to a head, forcing a decision from the Trump administration. At issue is whether to require offshore oil and gas drillers to shift work handled by international construction crews to domestic ones, something oil lobbyists warn could decimate deep-sea drilling in the Gulf.

For President Donald Trump, who has promised to both grow the domestic energy industry and preserve American jobs for American workers, finding a path forward is fraught with political pitfalls. Whatever decision he makes, he is bound to end up alienating one of his key constituencies.

"It is the quintessential buy American, hire American law," said Aaron Smith, president of the Offshore Marine Service Association, a trade group representing U.S. vessel owners and operators. "How they get away from that is beyond me."

At the center of the conflict is the seemingly small but lucrative matter of how equipment and other materials are moved around the offshore Gulf of Mexico.

Under a century-old law known as the Jones Act, only U.S.-owned vessels are allowed to perform such work within American waters. But over the decades U.S. customs officials made a series of exemptions, allowing oil and gas companies to employ foreign vessels to perform specific tasks such as moving the fluid that drillers use to lubricate wells between sites or laying down massive subsea equipment that can weigh hundreds of tons.

Then in 2009, former President Barack Obama ordered a review of those rules, setting off a panic in the offshore industry that gradually abated over the next eight years as no action was taken. Then, just days before leaving office, the Obama administration released a proposal that would repeal decades of U.S. Customs and Border Protection rulings that allowed the exemptions, forcing offshore oil companies to use U.S. ships and crews.

'Incredibly serious'

The oil and gas industry, however, maintains the American merchant fleet does not have the equipment and technical capacity to replace a larger and better capitalized international fleet that works in deepwater oil and gas fields all over the world and maintains large operations all along the Gulf Coast.

"This is incredibly serious," said Allen Leatt, CEO of the London-based International Marine Contractors Association, which represents ships and operators from outside the United States. "You remove all these rulings and put nothing in its place, these projects will have to stop. Industry cannot risk being in violation of the Jones Act."

The White House did not respond to a request for comment, but a spokeswoman for U.S. Customs and Border Protection said the agency, which postponed a decision by two months to allow more time for public comment, is scheduled to rule by May 18.

In response, the U.S. oil and gas industry has undertaken a fierce lobbying campaign to block a repeal. The American Petroleum Institute recently released a study forecasting 30,000 job losses in this year alone, mostly in the Gulf region, and a 23 percent drop in U.S. oil and gas production by 2030.

But around U.S. shipyards along the Gulf, that's all just noise. Since the steep drop in oil prices in 2014, the amount of work on offshore Gulf projects has mostly dried up. What's left typically goes to foreign crews, whom American captains and mariners maintain work for a fraction of the rates they command.

Jill Friedman, a 55-year-old captain living in Lake Jackson, has returned to school, hoping that if she can't sail, she might at least find work teaching search and rescue and other skills.

"I want to be out on the water," she said. "There's no work for us out there right now. Dozens and dozens of people I can name right now are out of work: captains, mates, deck hands. The foreign people work a lot cheaper than we do."

Preparing U.S. ships

In the minds of American mariners, when the Obama administration said it was reviewing the Jones Act rulings, the oil and gas industry was put on notice that its days of using foreign ships to move materials and equipment between drilling sites were at an end. Over the past eight years, the U.S. offshore marine industry - often referred to as merchant marines - has invested $2 billion retrofitting more than 30 ships to perform the deepwater work currently performed by international ships, said Smith, the president of the American maritime group, arguing his fleet was up to the task.

"We didn't have the vessels to do the work, so we went into U.S. shipyards and began building them. These are 300- to 400-foot-long vessels, with cranes that weight between 60 and 250 tons," he said. "This is about cost. A good U.S. captain in my industry makes $600 a day. A foreign captain makes $200 a day."

The Jones Act was created following World War I, to protect a U.S. merchant fleet considered essential to supplying American soldiers abroad with guns and other equipment in the event of war. To this day, foreign flagged ships are not allowed to transports goods between American ports.

Over the years, however, it was not uncommon for the U.S. government to allow exemptions in times of need, said Michael Sturley, a maritime law professor at the University of Texas-Austin. For example, after the Deepwater Horizon explosion in 2010, BP received a Jones Act waiver to hire foreign ships to bring spilled oil back to shore.

"There's a much smaller U.S. fleet on now (than during WWI)," he said, "but what there is now depends much more on the existence of the Jones Act," to prevent customers from hiring cheaper ships from abroad.

'Nice propaganda'

Meanwhile, international ship owners and crews continue to make the case in Washington that without them, offshore work in the Gulf would come to a halt.

Among the arguments used by U.S. maritime companies is that oil and gas drillers prefer international crews, which might be drawn from the less prosperous countries like the Philippines or Eastern Europe, because they are cheaper. Leatt, chief executive of the international maritime group, described that assertion as "nice propaganda."

He said the international crews are paid just as much as American ones, arguing it is their technical skills that oil and gas companies seek. As a result, he added, if they were forced to leave U.S. waters, oil companies would shift investment to deepwater fields in other countries where the crews could work.

"Some people might think they'll have a large slice of the pie," Leatt said. "But the reality is the pie will be a lot smaller and everyone loses."

James Osborne covers the intersection of energy and politics from the Houston Chronicle’s bureau in Washington D.C. Before arriving at the Chronicle in 2016, he spent three years covering Texas’s energy sector for the Dallas Morning News, where he chronicled the hydraulic fracturing boom, the rise of the wind and solar industries and how technology is changing the ways we produce and consume energy. James’s work has appeared in publications including The Philadelphia Inquirer, Time and Fox News.